New regulations, lawsuits hurting small CPA firms. (Texas State Board of Accountancy do away with peer review rule and allows auditing work by small accounting firms; liability cases)

For about six years, Robert Barron, a local certified public accountant, has been doing auditing work for a few of his clients every year. An owner of a small firm, he would do the tasks in order to accommodate clients he did other work for, charging them less than what he believes they would be charged by some of the larger firms.

But not anymore. Thanks to a quality review now required by the State Board of Public Accountancy, Barron and many other small firms are opting out of the auditing business.

Following the lead of the American Institute of Certified Public Accountants, the state Legislature adopted the rule requiring the quality review by peers in 1989, phasing it into effect over a three-year period beginning this year.

When the institute required it, those who chose not to be reviewed could simply drop their membership. But now the state requires the reviews for licensing of all accounting firms that do "attest functions" -- …